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China’s economy shows signs of stabilization in August

CHINA'S industrial output grew the fastest in five months in August from a year earlier, as demand for products perked up to consistent with the rebound of the official manufacturing activity and export for the previous month, showing signs of the stabilized growth momentum of world's second largest economy.

Industrial output rose 6.3 percent in August year-on-year, rising at the fastest pace since March this year, National Bureau of Statistics said today.

The increase in value-added industrial output, despite some factories suspending production prior to the G20 meeting in Hangzhou in early September, slightly exceeded a median market forecast of 6.2 percent growth.

Heavy industry including electric machinery and automobile boasted a large increase last month, accounting for a substantial share of economic output, data showed.

"The data suggest that the downside risk of gross domestic product (GDP) in the third quarter has significantly reduced," said analyst Louis Lam and David Qu from Australia and New Zealand Banking Group.

"If momentum holds up, China’s GDP could maintain a growth rate of 6.6 to 6.7 percent in the third quarter from a 6.7 percent in the second."

Fixed-asset investment outside China's rural households, the closely watched indicator of construction activity, climbed 8.1 percent from a year earlier in the January-August period, unchanged from the increase in the first seven months of the year. Private investment growth remained unchanged at a rate of 2.1 percent growth for the period.

Retail sales, a key measure of consumer spending, also beat expectations. It expanded 10.6 percent after a rise of 10.2 percent the prior month. Analysts had forecast an increase of 10.3 percent.

Sales of construction and decoration materials rose by the most of 16.3 percent in August among product consumption, along side with a property boom in tier one and tier two cities.

"In August... some indicators picked up, efforts of cutting overcapacity, reducing inventory, deleveraging, lowering costs and strengthening weak links achieved notable results," said NBS spokesman Sheng Laiyun.

"The national economy has achieved moderate but steady and sound development," he added, but urged caution.

"We must be aware that the domestic and external economic conditions are still complicated and severe with many instabilities and uncertainties," he said.

China is looking to retool the economy from a reliance on investment spending and exports to one driven more by consumer demand, but the transition has proven bumpy together with the structural reform and overcapacity reduction among SOEs.

Government have set a goal to cut 45 million tons of annual steel capacity this year, with the around 21 million tons had been eliminated by July, People's Daily reported last month.


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